17 April 2009
The Committee of European Banking Supervisors (CEBS) today publishes a report on the materiality of custodian banks' engagement in settlement internalisation and Central Counterparty-like activities. This forms part of its follow-up work in response to the ECOFIN's request on 3 June 2008 for a review of ‘the coverage of risks borne by custodians (…) so as to ensure a level playing field while avoiding inconsistencies in the treatment of custodians and double regulation'.
Following its report to the ECOFIN, published in December 2008, CEBS committed to undertake further work to assess the materiality of custodian banks' internalising of settlement activities and carrying out Central Counterparty-like activities. This was called for since the initial report identified certain gaps with regard to these activities in the currently applicable banking regulations, in comparison to the ESCB-CESR draft Recommendations for securities settlement systems and central counterparties.
In order to gather evidence about the extent to which such activities are performed, CEBS published a call for evidence on 2 February 2009. The responses, summarised in the report that CEBS publishes today, led CEBS to conclude that there is little evidence to suggest that action at a European level is needed to address the issue of settlement internalisation. However, in the medium term CEBS will investigate further risk management aspects relevant to banks that take on the role of general clearing member.